Blu-ray to Thrive Until 2017, Then Video-on-demand Services Will Take Over

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Blu-ray will be the driving force behind the video retail market throughout the next decade, but then it will be overtaken by video-on-demand-services a research firm predicts.

A new study by SNL Kagan research firm predicted a new wave of revenue growth in the retail home video business over the next decade, generated by the emergence of Blu-ray Disc as the next-generation DVD format.

The current economic climate, however, will slow the growth of this new format and likely keep it from reaching the heights that it may have in better times, according to the research. Video-On-Demand (VOD) services will continue to improve in both technology and content over the next decade and begin to draw consumers away from Blu-ray and DVD by 2017.

While the current impact of Blu-ray has been relatively minor (standard DVD still comprises 97.1% of the market), SNL Kagan projects that high-definition DVD will attain 59.7% market share in 2014, with $13.1 billion in revenue. By 2017, this figure is expected to soar to 73.8%, or $15.6 billion.

The SNL Kagan study points to 2010 as the start of the resurgence in retail revenue. Sales of Blu-ray players are expected to grow from $255.4 million in 2008 to $1.3 billion in 2010, reaching mass-market penetration and spiking to nearly $6.9 billion in 2013.

However, Blu-ray's dominance may be short-lived, with video-on-demand (VOD) poised to become a major force in home entertainment after 2017, the study predicts. SNL Kagan estimates that there will be 98.8 million high-speed Internet homes capable of delivering VOD in 2017 compared to 115.2 million high-definition DVD homes.

"Blu-ray will be the driving force behind the video retail market throughout the next decade," said Wade Holden, analyst at SNL Kagan. "The current economic climate, however, will slow the growth of this new format and likely keep it from reaching the heights that it may have in better times. VOD services will continue to improve in both technology and content over the next decade and begin to draw consumers away from Blu-ray and DVD by 2017."

Victor Matsuda, the Chairman of the Blu-ray Disc Association (BDA) Global Promotions Committee, has also admitted that the Blu-ray format may have to co-exist with digital downloads.

"We need to continue to emphasise the possible co-existence of Blu-ray Disc and digital downloads within the same market ecosystem," Matsuda said.

"We need to continue to emphasise the possible co-existence of Blu-ray Disc and digital downloads within the same market ecosystem," he added.